Rising Dividends and Fees: What Risks Lurk Behind WAM Strategic Value’s Strong Half-Year?

Robust Financial Performance

WAM Strategic Value Limited has delivered a standout half-year result for the six months ending 31 December 2025, with net profit after tax climbing 158.6% to $12.8 million. This surge reflects a combination of strong investment portfolio gains and disciplined management of operating expenses.

The company’s revenue from ordinary activities more than doubled, rising 165.3% to $21.8 million, while profit before tax surged 200.7% to just over $16 million. These figures underscore the effectiveness of Wilson Asset Management’s investment approach, which focuses on capitalising on share price discounts within listed investment companies and trusts.

Investment Portfolio Outperformance

Central to WAM Strategic Value’s success has been its investment portfolio, which increased by 9.8% over the half-year, outperforming the S&P/ASX All Ordinaries Accumulation Index by 5.4%. This outperformance was achieved despite holding an average cash position of 20.1%, reflecting a cautious yet opportunistic investment stance.

The net tangible asset (NTA) backing per share rose to $1.30 before tax and $1.33 after tax, up from $1.26 and $1.28 respectively at the previous half-year. This growth in NTA is a key metric for investors, representing the underlying value of the company’s assets after liabilities and fees.

Dividend Increase Signals Confidence

In recognition of the strong portfolio performance, the Board declared a fully franked interim dividend of 3.25 cents per share, up from 3.0 cents in the prior period. The dividend remains fully franked at a 30% tax rate, maintaining the company’s commitment to delivering tax-effective income to shareholders.

The Dividend Reinvestment Plan (DRP) continues to operate without a discount, offering shareholders the option to reinvest dividends into additional shares at market prices. The Board’s decision to increase the dividend reflects confidence in the company’s ongoing ability to generate sustainable profits and franking credits.

Governance and Risk Management

WAM Strategic Value maintains a comprehensive risk management framework overseen by its Board, which includes both independent and non-independent directors. The company identifies key risks including market volatility, investment strategy execution, economic factors, and operational risks such as cyber security and compliance.

The investment manager, Wilson Asset Management, plays a crucial role in day-to-day risk management and portfolio execution. The Board’s governance structure and oversight aim to mitigate conflicts of interest and ensure alignment with shareholder interests.

Outlook and Market Context

While the half-year results are encouraging, the company cautions that investment portfolio profits include unrealised gains subject to market fluctuations. The performance fees accrued during the period reflect strong returns but may incentivise higher risk-taking, a factor investors should monitor.

Overall, WAM Strategic Value’s results highlight the resilience and effectiveness of its investment strategy in a complex market environment, positioning it well for continued capital growth and income distribution.